Posts Tagged ‘Itemized deduction’

An Expense By Any Other Name

September 11, 2013

RoseA tax deduction is a tax deduction is a tax deduction.

People ask me all the time “What should I call this expense or that?” If you can show that there is a business purpose, it doesn’t matter to the IRS what you call it.  What is important is what it means to you in managing your business.

If you purchase an inkjet cartridge to print off brochures, you could call it computer supplies, advertising, office supplies, printing or anything else that has a meaning for you.

I once had a client bring in her list of expenses and saw a category called ESP.  When I asked her what that was, she told me Error Some Place.  Since it took place in her business account, we took the deduction (of course we called it something else).  And at the same time don’t use a label that will call attention to the deduction either.

The important thing is to keep your records and receipts so that when the IRS asks, you can easily support your deductions.

Good News. Bad News.

August 31, 2013

When buying furniture and equipment, the Internal Revenue Code Section 179 allows a business an option to write off the total cost in the year purchased. This is true whether or not you have made all the payments for the purchase.  So if you bought it on Good News Bad Newscredit you can still get the deduction. That is the good news. And that is the bad news.

The good news is that the deduction reduces your current year taxable income and possibly your tax.

The bad news is that you may need the deductions more in a future year.  And the deduction may be limited depending on your income.  And the rules have some twists and turns.  And, if you sell it, all the proceeds are taxable.

Don’t presume that it is best to take the deduction this year. Ask your Tax Professional.  More good news,  you now have enough information to ask some intelligent questions.

And, of course, you must keep good records.

Hint – Make a folder for each of your large purchases that have a warranty.  Put a copy of the receipt, warranty and instruction book in the folder.  A few months ago, I received a new part for my office chair because I could easily put my hands on the warranty and receipt.


%d bloggers like this: